Quebec City Mayor Régis Labeaume said he doesn't see how Gérald Tremblay can continue to run the city while he's being swarmed with allegations of corruption made at the Charbonneau commission.

On Monday, former construction firm vice-president Lino Zambito took to the stand at the inquiry and claimed that a portion of the value of public works contracts was funneled to Tremblay's political party.

Tremblay swiftly denied the allegations in a media scrum on Monday.

In Quebec City, Labeaume said: "I wouldn't want to be in his place. I don't know how you can manage a city under such allegations. Maybe the allegations are all false, but it's a little difficult to think that they all are. I'm not saying the mayor of Montreal is guilty, but I don't know how he can hold on."

He added that one solution would be to have political parties entirely financed by the government.

Onetime Montreal construction mogul Zambito testified on Monday that three per cent of the value of each contract was funneled back to Tremblay's Union Montreal.

Zambito said the money was paid to former Mivela Construction president Nicolo Milioto, who has been identified by police and Zambito as a middleman between construction magnates and Montreal's Rizzuto crime family. Zambito said the payments began in 2005 or 2006, and Milioto told him they were destined for Union Montreal.

It's the first time at the inquiry that testimony has linked direct payments from construction entrepreneurs to Tremblay and his party.

Tremblay's resignation demanded

Tremblay held a media scrum within hours to say that his municipal party's finances have been verified every year by Quebec's chief electoral officer without any findings of wrongdoing.

Montreal Mayor Gérald Tremblay says his municipal party is verified every year by Quebec's chief electoral officer, who has never found any wrongdoing. (CBC) (CBC)

"That rumour of the three per cent has been going on for a while, and as a result of that I verified, I asked my official agent to verify and I was assured that there was no illegal financing going on of my party," Tremblay said.

He said his administration is trying to crack down on construction-company corruption by delaying all non-urgent city work until the province can bring in new legislation to give municipalities more powers to control the tendering process.

A feisty Tremblay also scolded the media for calling on him to react almost daily to the fresh revelations at the inquiry in Montreal.

"I won't comment every time there's allegations at the Charbonneau commission.... We're going to wait for the findings and recommendations of the commission."

Montreal City Hall's opposition leaders called for Tremblay to resign. Vision Montreal Leader Louise Harel and Projet Montréal Leader Richard Bergeron said the mayor can't be trusted to govern until the next municipal elections, in November 2013.

Tremblay roundly rejected the idea.

Engineer got a cut, Zambito says

Monday's allegations from Zambito aren't the first time he has said construction companies paid a cut of their revenues.

According to his testimony last week at the Charbonneau commission, Milioto also collected a 2.5 per cent "tax" from city construction contractors that went to the Rizzutos. On RCMP surveillance video secretly recorded at the Rizzutos' former hangout in the Montreal neighbourhood of St. Léonard, Zambito and other industry bigwigs can be seen handing over wads of cash to Milioto. Other segments show Milioto and Mob bosses splitting up the money into piles and handing some of it to onetime Montreal Mafia godfather Nicolo Rizzuto Sr., who stuffs it into his socks.

A further one per cent cut, Zambito said Monday, was paid to the city engineer who approved contracts. There was a running joke that the official claimed a one per cent "GST" — the name being a tongue-in-cheek twist on the French-language acronym for the federal sales tax. It was apparently named for, and by, engineer Gilles Surprenant, according to Zambito.

"He picked the name himself," Zambito said. "TPS meant 'Taxe Pour Surprenant.' At the time, it was one per cent of the value of the work."

Engineer expected to testify

Surprenant is one of two city engineers who Zambito said vacationed with him at a resort in Mexico partly owned by his father, Giuseppe Zambito. The other engineer, Luc Leclerc, admitted to CBC's French-language channel over the weekend that he was in Mexico with Zambito and Surprenant, but said he thinks he paid his way, though he can't be sure.

Zambito first took the stand on Thursday, when he made stunning disclosures about how construction companies colluded to divvy up city work among them and rig the prices of contract bids. His testimony will take several days, a Charbonneau commission lawyer said Monday.

Retired city engineer Leclerc said he will be called to testify as well at some point.